"The decline in new orders activity augurs negatively for future service sector performance," wrote Goldberg in a note to clients.

The new export orders sub-index also tumbled, falling 6.5 pp to 51.5, from 58 the previous month.

The employment sub-index surged to 55.8, but a slowdown in new orders doesn't bode well for the services sector.

"With service sector employment accounting for the overwhelming majority of U.S. jobs, the recent underperformance in services is a worrying sign for future growth prospects," says Goldberg. "A further weakening in new orders activity is likely to lead a pullback in the employment component of the services survey, potentially suggesting a slowing in payroll growth."

December became the fourth straight month in which manufacturing activity outperformed services as measured by the ISM indices.